Franconia sees favourable economics at Birch Lake

The large Birch Lake nickel-copper deposit in northeastern Minnesota could be economically developed as a bulk underground mine, a preliminary economic analysis says.

The study, prepared for owners Franconia Minerals (FRA-V) by consultant Ross Glanville, shows positive economics at prices of US$2,300 per tonne (US$1.05 per lb.) for copper, US$11,000 per tonne (US$5 per lb.) for nickel, US$12 per lb. for cobalt, US$410 per oz. for gold, US$750 per oz. for platinum and US$225 per oz. for palladium. At those prices, a discounted cash flow analysis of the project gives an after-tax net present value of US$67 million at a 6% discount rate and US$30 million at an 8% discount rate.

At a 10% discount rate the project has a negative value of US$5 million, indicating an internal rate of return between 9% and 10%.

The project, in the Duluth intrusive complex about 10 km east of Babbitt, Minn., has an inferred resource of 39.3 million tonnes grading 0.72% copper, 0.22% nickel, 0.01% cobalt, 1 gram palladium, 0.5 gram platinum and 0.2 gram gold per tonne. The resource, calculated in 2005, was based on a cutoff value of US$30.85 per tonne.

The study based its conclusions on a 1.5-million-tonne-per-year bulk underground mining scenario, using room-and-pillar mining and treating the ores by conventional flotation. The mine would need a shaft for underground access. About 33 million tonnes of the resource would be recovered in this scenario.

Franconia is also considering development of the nearby low-grade Maturi resource, a 52-million-tonne inferred resource grading 0.76% copper, 0.28% nickel, 0.02% cobalt, 0.3 gram palladium, 0.1 gram platinum and 0.05 gram gold per tonne.

The flotation concentrate would feed a high-temperature, high-pressure oxidizing leach circuit, with electrowinning of copper and chemical precipitation of the nickel, cobalt, and precious metals. Annually, the plant would produce 10,000 tonnes copper, 2,300 tonnes nickel, 55 tonnes cobalt, 38,000 oz. palladium, 20,000 oz. platinum, and 5,000 oz. gold.

Capital costs are estimated at US$178 million, including US$129 million for the plant and US$31 million for mine development and a mining fleet. Early estimates of production costs show US$25.87 per tonne.

Franconia is considering the study’s recommendation to sink a 700- to 750-metre shaft to test underground mining and provide a bulk sample for metallurgical testing.